How has that minimum-wage hike worked for teens?

posted at 2:55 pm on July 1, 2011 by Ed Morrissey

Four years ago, Congress pushed the minimum wage up more than 40% in a three-step process that finished in 2009. How has that worked out for those most likely to find employment at that wage level — inexperienced teenagers? As the Wall Street Journal notes, the percentage of teens employed in this economy has fallen from 42% in 2001 to 24% today, and it’s worse among black and Hispanic teens:

Perhaps you’ve already noticed around the neighborhood, but this is a rotten summer for young Americans to find a job. The Department of Labor reported last week that a smaller share of 16-19 year-olds are working than at anytime since records began to be kept in 1948.

Only 24% of teens, one in four, have jobs, compared to 42% as recently as the summer of 2001. The nearby chart chronicles the teen employment percentage over time, including the notable plunge in the last decade. So instead of learning valuable job skills—getting out of bed before noon, showing up on time, being courteous to customers, operating a cash register or fork lift—millions of kids will spend the summer playing computer games or hanging out. …

But Congress has also contributed by passing one of the most ill-timed minimum wage increases in history. One of the first acts of the gone-but-not-forgotten Nancy Pelosi ascendancy was to raise the minimum wage in stages to $7.25 an hour in 2009 from $5.15 in 2007. Even liberals ought to understand that raising the cost of hiring the young and unskilled while employers are slashing payrolls is loopy economics.

Or maybe not. The Center for American Progress, often called the think tank for the Obama White House, recently recommended another increase to $8.25 an hour. Though the U.S. unemployment rate is 9.1%, the thinkers assert that a rising wage would “stimulate economic growth to the tune of 50,000 new jobs.” So if the government orders employers to pay more to hire workers when they’re already not hiring, they’ll somehow hire more workers. By this logic, if we raised the minimum wage to $25 an hour we’d have full employment.

The logic of minimum wage hikes (or the existence of it in the first place) is hard to discern anyway. Leaving aside the argument against a legal minimum, though, the effect of raising the level doesn’t end up delivering prosperity or more buying power. It drives up business costs with no commensurate increase in value, leading to either fewer employees or higher prices.

Either way, it erodes the buying power of those making the lowest wages while at the same time also eroding their bargaining value in the job market. After all, if a business has to hire someone at $2 more per hour, why not hire the more experienced applicant and avoid taking chances on the inexperienced? In a labor market in the shape as we have currently, no one needs to make the latter choice.

Arbitrarily raising the prices of services and goods in a marketplace causes inflation, not an increase in real value. They’re forcing consumers of labor to pay more for the same service, from which they will get no increased benefit — and that means that they will have to pass the costs along to the consumers of their goods and services, all through the distribution chain.

Whose money is getting given away? Yours and mine, and all 479,000 minimum-wage workers, that’s who. [I] can absorb the incremental loss of buying power, but the people at the bottom rungs cannot. If they’re lucky, all that will happen is that their buying power will remain the same as it was after a short period of adjustment. More likely, some of their jobs will get eliminated as businesses have to support the cost increase in some other fashion than price hikes.

And it’s not even the working poor that gets helped in the increase. The working poor may have started at minimum wage, but they move up as they progress in their jobs. It is an absolute fallacy to argue that minimum-wage workers have not gotten a raise since the last federal increase of the minimum wage; they get raises as they increase their value to their employer, not from Uncle Sam. Anyone who has worked at the minimum wage since 1997 is either switching jobs too often to get a raise or is not very productive. The people making minimum wage are by and large temporary workers and people who make most of their living through tips, the latter comprising three out of every five minimum-wage workers. It’s not an accurate reflection of their standard of living.

Two years ago, I noted that David Neumark accurately predicted the results of the 2007 legislation:

Based on their comprehensive reading of the evidence, Neumark and Wascher argue that minimum wages do not achieve the main goals set forth by their supporters. They reduce employment opportunities for less-skilled workers and tend to reduce their earnings; they are not an effective means of reducing poverty; and they appear to have adverse longer-term effects on wages and earnings, in part by reducing the acquisition of human capital. The authors argue that policymakers should instead look for other tools to raise the wages of low-skill workers and to provide poor families with an acceptable standard of living.

This policy has other, non-economic consequences. Thanks to the combination of government intervention and a poor economy (also the result of government intervention), we will have record numbers of teens without jobs this summer. That doesn’t bode well for local law enforcement as teen loiter instead of being involved in productive work. That will put more pressure on local and state government budgets at a time when they can hardly afford it.

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Comments

It could also have to do with the fact these government educated kids can not make change even with a cash register that tells them how much money to give in change? It could have to do with tattoos all over their body? It could have to do with every place on their face has piercing? It could also have to do they use ‘like’ every other word when talking to you?
L

Or maybe not. The Center for American Progress, often called the think tank for the Obama White House, recently recommended another increase to $8.25 an hour.

It drives up business costs with no commensurate increase in value, leading to either fewer employees or higher prices.

The again, given how difficult it is to find a job in this economy and the inability for employers to predict future liabilities, it might be prudent for them to layoff their mid-level (in pay) employees and replace them with equal talent at the lower -but improved- minimum wage rate.

I’ve lived and worked through all those years on the chart and having started as young as 11 as a pre-teen, I can tell you (as a just retired teacher) that much of that chart about minimum wages represents our corrupted culture and the expectation of free lunches and refusing jobs by today’s youth.

I know -there are some magnificant youngsters out there -but not enough by far.

Teens in general are gravely uninformed about economic issues. Cash is king, what’s in the pocket is what’s important. We all really need to do a far better job ensuring that teens, in general, public and private, are informed about the economy and wages and how and why jobs are created by employers or not.

My two youngest – 18 and 19 – had no problem getting jobs this month. Out of 20 applications, my daughter had 6 interviews and was hired within 3 days by one of them. My son knew before graduation where he wanted to work, a job paying $12.40/hour plus full benefits and 3 weeks of vacation. My daughter is working at $7.50/hour plus full benefits and 2 weeks of vacation – at the mall.

However, neither of them were able to get a job before graduation. The labor laws for teens are a pain in the butt for employers who have more than enough adults to choose from. One of our friends owns a Burger King franchise and won’t hire anyone under 18 for that very reason.

You do have to look and act the part. Clean-cut, well-spoken, out-going, with basic skills. One of my daughter’s friends applied at the same place she was hired but went in with no make-up, ratty jeans, and a casual shirt on, for a designer clothing store. Needless to say, she didn’t get the job. She also has a very negative personality which is not good for retail.

One more thing, it also helps if you have SOMETHING on your resume. Even if you have no job experience, activities and volunteering count for a lot.

My daughter’s manager told her he liked that she was so dedicated to her ballet for so many years. I had both kids put school activities and training like 4 years of advanced wood tech, marching band, and percussion on their resumes.

It shows that they filled their time with more than just video games, TV and texting.

The Center for American Progress, often called the think tank for the Obama White House, recently recommended another increase to $8.25 an hour.

These folks aren’t stupid, they know another increase won’t put more people to work or benefit the economy. Well, not as we imagine it. They are progressives and they believe they have the answers, but first they have to destroy the free market system.

However, neither of them were able to get a job before graduation. The labor laws for teens are a pain in the butt for employers who have more than enough adults to choose from. One of our friends owns a Burger King franchise and won’t hire anyone under 18 for that very reason.

You do have to look and act the part. Clean-cut, well-spoken, out-going, with basic skills. One of my daughter’s friends applied at the same place she was hired but went in with no make-up, ratty jeans, and a casual shirt on, for a designer clothing store. Needless to say, she didn’t get the job. She also has a very negative personality which is not good for retail.

Common Sense on July 1, 2011 at 3:12 PM

From my experience in a small town environment as a teen, surrounded by a somewhat rural area — then far-off, major tourist areas — I started working at the age of 12 and kept parttime jobs as were possible with school (year ’round, various parttime or onetime jobs), teens really, really need to be determined to get work and be willing to do whatever they find when they find it.

If you go around to malls and other franchises, you’ll have a harder time as has been pointed out when you’re under 18. BUT if you interact with your neighbors, befriend your friends’ parents (and talk with them whenever possible, be nice, be eager to know and learn and help out), you’ll find jobs if not be offered them.

People in general need odd jobs done on property and in business and even at home. You just have to be willing to take jobs when they’re offered and not expect to be hired as secretary to Bill Gates or to replace a Bank CEO for the summer.

My brother eventually won a four-year scholarship at a major university and he started out after his two paper routes, at the age of 15, by doing janitor work in the evenings after a local bank closed up. He eventually went on to create a banking corporation with partners.

My brother eventually won a four-year scholarship at a major university and he started out after his two paper routes, at the age of 15, by doing janitor work in the evenings after a local bank closed up. He eventually went on to create a banking corporation with partners.

Lourdes on July 1, 2011 at 3:20 PM

…and he’s a millionaire today and has been for a while, and it wasn’t from the banking business he became wealthy as he is but from later businesses he built and later sold.

Williams debunks many common labor market myths and reveals how the minimum wage law has imposed incalculable harm on the most disadvantaged members of our society. He explains that the real problem is that people are not so much underpaid as underskilled and that the real task is to help unskilled people become skilled.

After all, if a business has to hire someone at $2 more per hour, why not hire the more experienced applicant and avoid taking chances on the inexperienced? In a labor market in the shape as we have currently, no one needs to make the latter choice.

What my 3 teens have found is that most places want 18 year olds and older. Not too long ago many of these same businesses would hire 16 and 17 year olds.

Here’s a closer look at how the most recent change in the minimum wage has played out in the economy, specifically focusing on teens. The bottom lines:

What we find is that the teen employment level invariably falls in the months following an effective increase in the federal minimum wage, whether driven by the expectation that the minimum wage will soon be increased as employers stop hiring teens (January 2007 to May 2007), to the six month window of time following when a scheduled increased in the minimum wage occurs as employers absorb the impact (July 2007, July 2008 and July 2009) and to when the minimum wage is effectively increased in relative terms due to the effect of deflationary or near-deflationary conditions (October 2008 to June 2009, April 2010 to September 2010).

Finally, we observe that the teen employment level, which is clearly very sensitive to the minimum wage level given the high percentage of teens who earn it, would seem to be only modestly affected by whether or not GDP is generally rising (2007, July 2009 – December 2010) or falling (January 2008 to June 2009), as the state of the U.S. economy would appear to be in the back seat in considering what’s driving teen employment levels.

Frankly, we should have kids right now who know how the inside of a video game console runs, instead of just knowing how the play the stupid games themselves!
Science and math scores in schools these days are at an abysmal all time low! You are seeing the fruits of that fact right now!
pilamaye on July 1, 2011 at 3:34 PM

Actually, it is probably better for them to learn how to adapt to different graphical interfaces. They probably aren’t getting squat from playing FPS games, but they might be learning useful skills with more complicated RPG games.

My daughters needed jobs badly this summer to save some money for college but haven’t been able to find a thing.

Kudos to the illegal alien loving, minimum wage hiking, kings and queens of unintended consequences. The disgustocrats just love Soviet style central planning. I think the Soviets were better at it though.

I don’t have time to read the WSJ original text, but do they account for the fact that in a recession, some of the unemployed have taken some (sometimes multiple) of those minimum wage jobs away from teens just to have some income?

Need to study if we have fewer employees at minimum wage or just fewer teens.

The long-term consequence haven’t even been felt yet. We now have a cohort with 75% unemployment rate, at what point do they learn how to be productive and useful employees? Some will, no doubt, but a percentage will learn to accept living on the dole as they enter adulthood.

Obama and the dem’s are NOT stupid. They know EXACTLY what they are doing, and are doing it on purpose. They really truly do not care who they hurt.

JustTruth101 on July 1, 2011 at 3:14 PM

I totally disagree — they are beyond stupid. Stupid people make dumb mistakes. Really stupid people make calculated mistakes. Horrendously stupid people make really stupid mistakes repeatedly by ignoring the outcome of their really stupid mistakes. A certain portion of the disgustocrats are nearly incapable of making the correct decision, unless they did ti by mistake. That portion is stupid. The remainder are just plain evil.

Raising minimum wages is a palliative to the masses, who don’t know better. Then when the unemployment among the minimum wage folks increases “unexpectedly” the political class can turn to more regulation which gives them more power whilst doing nothing for business or employment.

What really needs to be hammered home are two things: 1) Value is the important thing. Raising the minimum wage doesn’t create more value – quite the opposite; and 2) People don’t stay at minimum wage long. Once they become valuable, the command more in the marketplace.

The minimum wage. Leaving aside how stupid it is in general, what excuse does the federal government have for imposing one on the states?

Count to 10

The General Commerce Good and Welfare Clause.

By the way, next time some idiot lib says the economy will improve if we just go back to the tax levels that were in place under Clinton, ask them if we should go back to the minimum wage rates under Clinton too.

Correlation != Causation, Ed. You know that.
I would wager it’s not because of the minimum wage, it’s because over-qualified, educated adults are being forced to work the MW jobs to make ends meet while they are between jobs.
I have a decent job now, as a 26 year old (thank god).. but I’m college educated and had to settle for a job at SIX FLAGS because there was literally nothing else and I had bills to pay.
I sneaked a peek at the resumes for my current job – people with advanced degrees, 20 years of experience, halfway across the country. People are desperate.
triple on July 1, 2011 at 3:57 PM

In this case, the causation is plain to see. The minimum wage has destroyed a lot of jobs. In fact, you would have had an easier time finding a job if not for the higher order effects of the minimum wage. Granted, it might not have payed as much, but you would have had more to choose from.

The minimum wage. Leaving aside how stupid it is in general, what excuse does the federal government have for imposing one on the states?

Count to 10 on July 1, 2011 at 3:24 PM

Anyone know if a state has ever challenged the federal mandate and on what grounds? I imaging the optics would be horrible and the progs would pile on mercilessly, but if it could ever be done it is now.

The folks who fought for, protested and keep getting minimum wage laws passed do not have “teens” on their radar.

They have absolutely no interest in teen employment.

They fight for under achieving adults, slackers and illegal immigrants. They actually believe they can get the minimum wage hiked up to the point for their Holy Grail: “The Living Wage”.

So someone with limited skills and ambition can live uber comfortably without having to strive for more on their own or sacrifice to make a better living for themselves. They want the aforementioned to be able to be on cruise control from cradle to grave with the only requisite being “showing up” for work.

It could also have to do with the fact these government educated kids can not make change even with a cash register that tells them how much money to give in change? It could have to do with tattoos all over their body? It could have to do with every place on their face has piercing? It could also have to do they use ‘like’ every other word when talking to you?
L

letget on July 1, 2011 at 3:02 PM

My son has none of those characteristics and he can’t find a job. He has managed to get a few hours a week at a local family-owned bakery that pays him cash. He has been told by more than one business owner that if the minimum wage were still $5.50 he would have a job. But no 17-year-old is worth $8 an hour. Plus, with the economy so bad, most employers can hire an older unemployed person with experience, so they have no need to hire teens who need training.

The folks who fought for, protested and keep getting minimum wage laws passed do not have “teens” on their radar.

They have absolutely no interest in teen employment.

They fight for under achieving adults, slackers and illegal immigrants. They actually believe they can get the minimum wage hiked up to the point for their Holy Grail: “The Living Wage”.

So someone with limited skills and ambition can live uber comfortably without having to strive for more on their own or sacrifice to make a better living for themselves. They want the aforementioned to be able to be on cruise control from cradle to grave with the only requisite being “showing up” for work.

Teens schmeens, they could care less about them.

Opposite Day on July 1, 2011 at 4:36 PM

+100

High minimum wage + Earned Income Tax Credit + food stamps + Obamacare = millions staying in menial jobs forever (if they can find one) and voting Democratic. Once people move up the ladder and start paying taxes, they tend to get more conservative.

High minimum wage + Earned Income Tax Credit + food stamps + Obamacare = millions staying in menial jobs forever (if they can find one) and voting Democratic. Once people move up the ladder and start paying taxes, they tend to get more conservative.

Abolish the minimum wage.
No great journey ever begins until someone somewhere takes the first step.
Abolish the minimum wage and eliminate whole government departments. Just eliminate them.

If a concerted and effective and truthful ad campaign were produced that educated the public with passion that did more then just show people the damage these things have caused them, but then also revealed not what they would lose, but all they would gain, I am certain in time the minimum wage would be abolished and whole agencies would be eliminated. And the push would be from the public, not just a few in congress. The ad campaign would have to be completely truthful.
People need educated. Don’t even liberals tout the importance of education? Isn’t the education budget a sacred cow of the Democrats? Then educate the people in conservative principles. Bring conservatism into their kitchens. Make it plain. Make people own it! Take the blinders off their eyes! This is what the Democrats fear. An educated and informed public. Democrats need people to be ignorant and blind. Democrats are powerless against an informed public.

Truth is a powerful weapon and passion and creativity is it’s delivery system! People by the millions have come from across the world and endured and risked so much for the chance at freedom in a place called America. Would they not risk as much again, if they realized that same freedom, all those same opportunities were still right here under their very feet? If they saw a land of opportunity awaited them not in some far off place high on top of some far off mountain across some distance sea but that it was still right here in the very place they were standing!

People can rise to the occasion when given the right opportunities and inspired with the right incentives. America is still here. The Democrats have just built a wall around it. One that we can all tear down brick by brick!

Abolish the minimum wage! Eliminate government agencies! Free people of restrictive big government regulations and taxes and watch the productivity and wealth if this nation skyrocket like it never has before!

You want to see big business suddenly become receptive to it’s customers wishes? Free up and encourage small business! Suddenly giants like AT&T, Microsoft, Pepsi, GM will over night become user friendly when they are faced with a thousand tiny competitors who could turn into the next AT&T, Microsoft, Pepsi or GM because they are delivering exactly what their customers have been wanting and demanding and doing it 10x more efficiently because they are no long burdened by a minimum wage and a thousand other government regulations!

We don’t always need new ideas! We more often just need to be reminded of the truth!

You know the sun has been around a long time too. So has water and oxygen. They are still just as important and relevant as ever. So are conservative ideals and principles. Our Bill of Rights and our ideas of self government will always be relevant and never be out of style.
A thousand years from now guns and homes are going to look a lot different than they do today, but the principles of property rights and the right to self defense and individual freedom will still be as relevant and necessary as it is today!

It’s a simple concept. You can change the price of something, but you can’t change it’s inherent value. Overpricing has the opposite effect, in that it makes things of lesser value essentially worthless.

Obama and crew are either really ignorant, or really malicious. Anyone paying attention now, should be able to see that after years of such policy from the left, it’s not the former.

Hey kids! Be careful how you vote if you want your value to be worth something.

I TOLD People this would result, yet they told me I was wrong because nobody should have to work for 5.15$hr.

HEY! IF you don’t want to, get an education, or enter a trade. You need skills, and 17 year old kids who take your stupid MOVIE TICKET in a line at the theater, are not worth $8.00 hr, its not that complicated!!!

Every time liberals demand an increase in the minimum wage, we warn them that raising the minimum wage causes higher unemployment for unskilled labor and entry level positions. And every time, they react in outrage and pretend that conservatives are just greedy.

And every time, once they raise the minimum wage, unemployment goes up.

Telling a business that they can’t offer a job that pays less than the minimum wage means that … they won’t offer those jobs. Is a person better off getting paid $4.50 an hour, or not having a job at all?

Somehow, liberals never ask these questions.

BTW, minimum wage laws are the single biggest reason that businesses are looking for cheap immigrant labor.